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Immaterial Errors CAR 2021.pdf
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2.704Mb
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Final Accepted Manuscript
Affiliation
University of ArizonaIssue Date
2021-09-28Keywords
error correctionfinancial reporting quality
materiality
misstatement correction
out-of-period adjustment
revision
Metadata
Show full item recordPublisher
WileyCitation
Choudhary, P., Merkley, K., & Schipper, K. (2021). Immaterial Error Corrections and Financial Reporting Reliability. Contemporary Accounting Research.Journal
Contemporary Accounting ResearchRights
© 2021 Canadian Academic Accounting Association.Collection Information
This item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at repository@u.library.arizona.edu.Abstract
We provide large-sample archival evidence on the nature and consequences of errors deemed immaterial to the previously issued financial statements containing the errors (immaterial errors). The incidence of immaterial error corrections has been increasing since about 2004, and these corrections are associated with modestly and discernibly negative share returns that are more negative for income-decreasing corrections and corrections that involve multiple issues. We find that immaterial errors are a leading indicator of poor reporting reliability as measured by future material and immaterial reporting errors, material weaknesses in internal controls, and SEC comment letters. Our findings suggest that immaterial errors provide researchers and investors with a more frequent and less severe indicator of potential audit or financial reporting issues as compared to more extreme reporting problems such as material errors corrected by restatements.Note
12 month embargo; first published: 07 July 2021ISSN
0823-9150EISSN
1911-3846Version
Final accepted manuscriptae974a485f413a2113503eed53cd6c53
10.1111/1911-3846.12713